Secretary for Justice v. Jerome Yuval Arnold Herzberg

CAAR8/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION FOR REVIEW NO. 8 OF 2008

(ON APPEAL FROM DCCC NO. 3 OF 2008)

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BETWEEN

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Before : Hon Ma CJHC, McMahon and Lunn JJ in Court

Date of Hearing : 9 December 2009

Date of Handing Down Judgment : 14 December 2009

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J U D G M E N T

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Hon Lunn J (giving the judgment of the Court) :

INTRODUCTION

1.Pursuant to leave granted by the Chief Judge, Ma CJHC, counsel for the Secretary for Justice applied, pursuant to section 81A of the Criminal Procedure Ordinance, Cap. 221 for review of the overall sentence of three years and four months’ imprisonment imposed on the respondent by HHJ Joseph Yau in the District Court, following his pleas of guilty to five charges of dealing with property known or reasonably believed to represent the proceeds of an indictable offence, contrary to section 25(1) of the Organized and Serious Crimes Ordinance, Cap. 455 (“OSCO”). The judge imposed sentences of three years and four months’ imprisonment on the respondent in respect of each charge, which sentence was ordered to be served concurrently. It was submitted on behalf of the Secretary for Justice that the overall sentence imposed on the respondent was “manifestly inadequate and/or wrong in principle”.

THE CHARGES

2.Four of the charges (Charges 1, 2, 8 and 10) related to monies received into four bank accounts opened and operated by the respondent in Hong Kong in the names of three companies registered in the British Virgin Islands (“BVI”) : Global Trade Services Limited (“GTS”), Global Clearing Services Limited (“GCS”) and Evergreen Equity Limited (“Evergreen”). The respondent was the director of each of the companies and a sole signatory of the respective bank accounts, save for one of the two accounts opened in the name of GCS of which he was one of the two signatories, the other being a secretarial company he had engaged whose signature was permitted by chop impression. The time period stipulated in each of those four charges reflected the date upon which the respective bank accounts were opened and closed and, overall, encompassed the period 7 June 2005 to 14 March 2007. The amount of money alleged to have been dealt with in each of the bank account stipulated in the charges was :

(1)  Charge 1 : $349,386,105.65, on and between 7 June 2005 and 4 August 2006, in an account in the name of GTS with DBS (Hong Kong) Limited;

(2)  Charge 2 : $199,341,751.29, on and between 20 September 2005 and 10 February 2007, in an account in the name of Evergreen with the Bank of East Asia Limited;

(3)  Charge 8 : $94,656,420.27, on and between 1 December 2005 and 27 December 2006, in an account in the name of GCS with Standard and Chartered Bank (Hong Kong) Limited; and

(4)  Charge 9 : $39,673,530.27, on and between 23 September 2006 and 14 March 2007, in an account in the name of GCS with Hang Seng Bank Limited.

3.The 5^th charge, Charge 11, related to monies received into a bank account opened in the name of the respondent with the Hong Kong and Shanghai Banking Corporation into which $24,950,421.28 was transferred on and between 25 August 2005 and 30 January 2007, having been received first by one of the bank accounts operated in the name of one or other of the BVI companies.

4.The ‘Particulars of Offence’ of each of the five charges alleged that the respondent had dealt with the stipulated amounts of money received into the respective bank accounts in the stated time period :

“…knowing or having reasonable grounds to believe that the property… in whole or in part directly or indirectly represented the proceeds of an indictable offence.”

THE FACTS

5.The respondent accepted as the factual basis of the court accepting his pleas of guilty a Summary of Facts in which the monies received into the four bank accounts in the name of the three BVI companies and the bank account in the name of the respondent was described as (paragraph 3) :

“…. (having) emanated from share trading in the United Kingdom in breach of United Kingdom laws because none of the companies selling their shares in England were registered with the Financial Services Authority to market or sell shares in the United Kingdom.  Investors in such shares, who were based in England, were induced to transfer monies to the four bank accounts in Hong Kong.”

6.The total amount of monies received into the four bank accounts in the respective periods stipulated in the Particulars of Offence was $683,057,807.66. Investors identified and contacted by the prosecuting authorities in Hong Kong identified the corporate entity, whose staff had induced them to purchase such shares and transfer monies into the bank accounts in Hong Kong, as being ‘the Pricestone Group’, ‘Pricestone’ or ‘Price Stone’. The shares which they purchased were shares in companies in the United States of America but, unknown to the investors, subject to significant restrictions in respect of resale, none of which they were able to sell.

7.On 12 July 2006, DBS Bank having suspended the operation of a bank account opened in the name of GTS, following a complaint made by a customer, the respondent was informed by Mr John Ward, a senior member of the staff of DBS Bank, that (paragraph 12) :

“…there have been claims of fraud made against Pricestone and that an investor alert had been issued by the FSA in the UK and the SFC in Hong Kong.”

In consequence, the respondent agreed to make repayment of monies paid into the account by that complainant who had contacted DBS bank and to close the account.  Nevertheless, the respondent was permitted to remit over $3.6 million from the account before its closure on 4 August 2006.

8.Notwithstanding those circumstances, not only did the respondent continue to operate the two existing bank accounts in the names of Evergreen and GCS but also he opened a new account in the name of GCS with Hang Seng Bank on 23 September 2006. The total amount of monies received into those three accounts from 12 July 2006 until their respective closures was $228,465,578.77, made up of remittances of (paragraph 13) :

(i)  the equivalent of $162,379,004.61 in the account of Evergreen at the Bank of East Asia;

(ii)  $26,413,323.67 in the account of GCS at Standard Chartered Bank; and

(iii)  $39,673,530.27 in the account of GCS at Hang Seng Bank.

Remittances from the four bank accounts to accounts in the name of ‘Euronet Escrow Services’

9.On the instructions of the respondent, remittances were made from the four bank accounts to two bank accounts in the name of ‘Euronet Escrow Services’, one in Zagreb and the other in Amsterdam, to a total of 600,047,540.70 :

(i)  in the period between August 2005 to August 2006, $304,904,459.49 from the account of GTS;

(ii)  in the period between October 2005 to February 2007, $181,297,800 from the account of Evergreen; and

(iii)  in the period between December 2006 to March 2007, $130,845,281.21 from the two GCS accounts.

10.It was accepted in mitigation advanced on behalf of the respondent that, having joined Pricestone as an ‘IT’ consultant in 2004 and having gone on to become its company secretary, on the instructions of the owners of Pricestone the respondent came to Hong Kong and opened up the various bank accounts to receive monies from investors purchasing shares through Pricestone. Also, part of his duties was to effect delivery of the related share certificates to the respective purchasers.

REASONS FOR SENTENCE

11.In his reasons for sentence the judge noted that, given the variety of circumstances in which commission of the offence was possible, there was no ‘sentencing tariff’. Whilst the judge observed that the prosecution accepted the admission made on behalf of the respondent that, having been told by Mr John Ward on 12 July 2006 of complaints of fraud by Pricestone, only after that date did the respondent actually have a “reasonable belief” that the monies with which he was dealing in the various accounts were the proceeds of crime, the judge went on to determine (paragraph 23) :

“Judging from the facts admitted by the defendant the court is of no doubt that even before that date there were strong reasonable grounds to support the belief that the monies represented the proceeds of crime.”

In consequence, he stated that he took into account the whole of the amounts of monies remitted into the accounts for the purpose of determining the appropriate sentence.

The respondent’s role

12.Of the respondent’s role, the judge determined that he (paragraph 24) :

“… played an active and dominant role in the laundering process in Hong Kong both before and after 12.7.2006.”

Furthermore, he determined that (paragraph 25) :

“... there was a degree of sophistication in the present case because the investors were to told remit money to different bank accounts in a foreign country and some of the monies were then transferred to a bank account in yet another country and the personal account of the defendant.”

Finally, having stated that he accepted that the respondent “had no actual knowledge of the monies being proceeds of crime” the judge determined that he was “an important cog in the scheme and was crucial to its successful operation”.  He went on to observe that a “substantial amount of money” was involved and determined that the circumstances of the commission of the offences were aggravated by the “ prolonged period of time” over which they were committed.

Starting point

13.In identifying a starting point for sentence of five and a half years’ imprisonment in respect of each of the charges, the judge stated that he took an “approach of a global sentence” for all the charges. In discounting that starting point to the sentence of three years and four months’ imprisonment imposed in respect of each of the charges the judge stated that he had regard to (paragraph 27), “… the guilty plea and other mitigating factors”. Of those mitigating factors, the judge had noted that not only had the respondent not been convicted of any criminal offences but also the court had received a series of letters by way of character references, which spoke to his qualities of loyalty, trustworthiness and naivety. Furthermore, the stress of the proceedings had exacerbated a pre‑existing medical condition.

SUBMISSIONS ON BEHALF OF THE APPLICANT

14.It was submitted by Mr Turnbull, on behalf of the Secretary for Justice, that in determining the appropriate sentences to impose upon the respondent in the judge had failed to give sufficient weight to

(a)  amount of money involved, namely over $683 million;

(b)  the need for a deterrent sentence; and

(c)  the circumstances specific to the commission of the offence by the respondent.

(a)  The amount of money involved

15.Mr Turnbull invited the court to note that the judge had described the amount of money involved in the commission of the offence as being “substantial”. He submitted and that it was more properly described or categorised as being “huge”. In support of that submission, he drew the court’s attention to the fact that appellation had been ascribed, in the judgment of this court in HKSAR v Chen Zhen Chu [2007] 5 HKC 505 (at 511A, paragraph 31), to the sum of $73 million remitted in a 13 month period by over 1,500 remittances from Australia to bank accounts in Hong Kong. In quashing the sentence of nine years imprisonment imposed upon Chen Zhen Chu, following his conviction after trial of a single count of dealing with property known or believed to represent proceeds of an indictable offence, the court identified seven and a half years’ imprisonment as the appropriate starting point and imposed that sentence. The trial judge had stated that the underlying nature of the indictable crime, giving rise to the proceeds, had not been identified.

(b)  The need for a deterrent sentence

16.Of the appropriateness of the imposition of a deterrent sentence, for an offence of dealing with property known believed to represent proceeds of an indictable offence, Mr Turnbull referred to the judgment of this court in HKSAR v Javid Kamran (unreported, CACC400/2004, 12 April 2005) in which Yeung JA in giving the judgment of the court noted that money laundering was to be regarded as a very serious offence and said (paragraphs 32 and 33) :

“32.  Successful deterrents against money laundering could be  effective measures against crime.

33.  The maximum sentence for a money laundering conviction on indictment is a fine of $5 million and 14 years’ imprisonment, which is perhaps a reflection of how such an offence is viewed.”

(c)  The specific circumstances of the commission of the offence

(i)  Benefit to the respondent of $24.9 million

17.Mr Turnbull submitted that although the judge had adverted to the fact that a total of over $24.9 million had been remitted to an account in the name of the respondent, from the four bank accounts of the three BVI companies into which they had been received, he did so only in the context of the “sophistication” of the operation, rather than stating that he did so in the context of determining the extent to which the respondent had benefited himself from the enterprise. He invited this court to note that the monies had been received in the respondent’s bank account in a period of one year and five months. He submitted that the mere fact of the respondent’s dealing with that amount of money alone, in the circumstances of the commission of this offence, irrespective of the total amount of monies dealt with, justified the imposition of a sentence after trial of five years’ imprisonment. In support of that assertion, he referred to the judgment of this court in HKSAR v Au Hau Ching (unreported, CACC146/2008, 13 August 2009) in which a sentence of five years’ imprisonment for dealing in a slightly lesser amount was described as being “below that which may well being considered to be appropriate, albeit not to the extent that it was manifestly inadequate”. In the event, this court reduced that sentence by two months to reflect that period of time in which the appellant had been detained in custody in Malaysia.

(ii)  Distinction to be drawn between monies dealt with before and after 12 July 2006

18.Mr Turnbull submitted that, although the judge had stated that he took into account in determining the appropriate sentence the total amount of monies dealt with in the five bank accounts described in the respective charges, he was in error to state that :

“… a distinction has to be made between monies received before and after 12 July 2006 in determining the quantum of the sentence.”

Mr Turnbull submitted that that was not the correct approach.  The offence was made out on proof of “knowing or having reasonable grounds to believe” that the monies were the proceeds of an indictable offence.  The judge had found that the “strong reasonable grounds to believe” that to be the case before 12 July 2006.

(iii)  The international element

19.It was contended on behalf of the Secretary for Justice that, although the judge adverted to the fact that, in the first place, the investors sent monies to the bank accounts in Hong Kong and, secondly that “some of the monies were then transferred to a bank account in yet another country”, the judge had given insufficient weight to the scope of the international elements in the commission of the offence. Firstly, he reminded this court that the salesman who were employing high‑pressure marketing techniques on potential investors were based in Spain and made contact with investors in the United Kingdom by e-mail and telephone. Secondly, the three companies used to open bank accounts in Hong Kong were BVI companies, of which the respondent was the director and signatory of their bank accounts. Thirdly, over $600 million of the monies received in the four bank accounts of the three companies were remitted to two bank accounts, one in Amsterdam and the other in Zagreb. He contended that it was to be inferred that the remittance of monies from Europe to Asia and then back to Europe in that scheme was, “an attempt to add layers to the fund movement designed to conceal the whereabouts, and authenticity of the victims funds.”

(iv)  The continuation of the respondent’s conduct after 12 July 2006

20.Mr Turnbull submitted that the judge had failed to give consideration or weight to the fact that the respondent continued to deal with monies received in the bank accounts after 12 July 2006. He had opened a new bank account of GCS with Hang Seng Bank in September 2006. Further, that he had continued to ‘deal’ in monies remitted to those accounts until March 2007, notwithstanding that he had been warned for a second time, this time at the end of 2006 by a friend at Standard Chartered bank, of concerns about the provenance of the monies received into that bank account. In the context of those dealings, it was contended that the judge erred in determining that “the defendant had no actual knowledge that the monies he laundered were proceeds of crime”. It was submitted that the concession made in mitigation on behalf of the respondent that, following the conversation with Mr John Ward on 12 July 2006, ‘mens rea’ in the respondent began to run amounted to an admission of actual knowledge of the nature of the proceeds.

(v)  The respondent’s knowledge that the monies were the proceeds of ‘serious crimes’

21.Finally, Mr Turnbull submitted that the judge failed to take into account as an aggravating factor in the commission of the offence that after the conversation of 12 July 2006, in which he was told by Mr John Ward of complaints of fraud against Pricestone and of ‘Investor Alerts’ issued by the regulatory authorities in both the United Kingdom and Hong Kong, the respondent knew the monies received into the accounts he had opened were the proceeds of ‘serious crimes’.

The apposite ‘starting point’ and sentence

22.Having conceded that the prosecution authorities were in error in bringing the proceedings in the District Court, rather than the High Court, Mr Turnbull submitted that nevertheless the judge had power to take a ‘starting point’ greater than seven years imprisonment, albeit that he was required to give a “meaningful discount” to the respondent for his pleas of guilty (see the judgment of this court in HKSAR v Li Yan [1998] 4 HKC 12 at page 14 D‑G). In the result, he submitted that an appropriate starting point for sentence was in the range of eight to nine years’ imprisonment. Allowing for a “meaningful discount” he suggested that an overall sentence in the range of five years and four months to six years’ imprisonment was appropriate. Accordingly, he submitted that the sentence imposed by the judge was unduly lenient and satisfied the test for review of sentence by this court in that it :

“… ‘fell outside the range of sentences which the judge, applying his mind to all the relevant factors could reasonably consider appropriate’: per Lord Lane CJ in Attorney-Generals Reference No. 4 of 1989 (1989) 11 Cr. App R(s) 517, 521 [as approved in the Attorney-General v Tai Chin Wah (1994 )2 HKCLR 81, 86].”

SUBMISSIONS ON BEHALF OF THE RESPONDENT

23.In resisting the application made on behalf of the Secretary for Justice, Mr Grossman SC submitted that the sentence imposed upon the respondent “is already a very high one and there is no basis in principle for increasing it”.

The role of the respondent

24.Of the respondent’s role in the commission of the offences, Mr Grossman submitted that the respondent was to be viewed as an “unknowing cog in a money‑laundering exercise”. He contended that a distinction must be drawn for purposes of sentencing between a person who :

“… knowingly involves himself in an illegal scheme for his own (and other’s) benefit and a person who finds himself, suddenly enmeshed in an illegal enterprise constructed by another and which he has been used, hitherto as an innocent pawn.  Additionally where the hitherto innocent person finds himself in a situation where to his discomfort he finds he is a cog in an illegal enterprise and through passivity or naivety simply lets matters drift or seeks to disentangle himself from it.”

The respondent’s conduct pre/post 12 July 2006

25.Mr Grossman submitted that the judge was correct in approaching the determination of the respondent’s culpability by distinguishing between his conduct in the period up to 12 July 2006 and that which occurred thereafter until March 2007. He contended that it was only after his conversation with Mr John Ward on 12 July 2006 that the applicant “became aware” of the nature of the underlying offence and therefore the provenance of the proceeds. He suggested that the respondent’s conduct in that latter period was “largely a question of disengagement”.

Benefit to the respondent

26.Of the issue of the benefit derived by the respondent Mr Grossman conceded that monies were paid into an account in the name of the respondent with HSBC, namely $24,950,421.28 but asserted “…also monies were paid out of it. So it is not clear exactly how much he benefited from this arrangement.”

The amount of money involved

27.Of the submission made on behalf of the Secretary for Justice, that the judge gave insufficient weight to the amount of money involved, it was contended on behalf of the respondent that it mattered not whether the amount of money was categorised as “substantial” or “huge” what was of relevance was that the respondent “only became aware of the illegal nature of the enterprise at a relatively late stage”.

The provenance and underlying nature of the remittances

28.Mr Grossman submitted that not all of the proceeds remitted to the bank accounts of the BVI companies in Hong Kong were proceeds resulting from illegal activities. Mixed with proceeds that fell into the latter category were proceeds that were not so tainted. It was not known what was the balance between the two categories.

A deterrent sentence

29.Of the appropriateness of the imposition of a deterrent sentence of imprisonment, Mr Grossman submitted that the deterrent factor was :

“… the clang of the prison gate itself with the concomitant destruction of family life, career, reputation and overwhelming humiliation.”

He suggested that it was idle to contend that a person would be deterred from committing the offence because of the possibility of serving a sentence of five years’ imprisonment rather than that of three years’ imprisonment.

Events subsequent to sentencing

30.Finally, the court was invited to have regard to factors that had impacted on the respondent since sentence was imposed, in particular during the currency of this application for review the inability of the respondent to apply to serve his sentence of imprisonment in the United Kingdom, which would enable his parents to visit him more easily and frequently, his father living in the United Kingdom and his mother in France.

A CONSIDERATION OF THE SUBMISSIONS

The seriousness of the offence : factors relevant to culpability

31.The seriousness of the offence of dealing in property known or reasonably believed to represent the proceeds of an indictable offence, contrary to section 25(1) of OSCO is reflected in the available penalties, namely a fine of $5 million and imprisonment for 14 years. As this court has said on previous occasions there is a very wide range of culpability in the commission of the offence. Some of the factors relevant to a determination of culpability in the commission of a particular offence were identified in the judgment of this court delivered by Yeung JA in Javid Kamaran (paragraph 35) :

“… the nature of the offence that generated the laundered money, the extent to which the offence assisted the crime or hindered its detection, the degree of sophistication of the offence and perhaps the defender’s participation, including the length of time the offence lasted and the benefit he derived from the offence.”

Other factors that are relevant to the issue are the amount of money involved, the degree of sophistication of the operation, the defendant’s knowledge of the nature of the underlying offence and whether or not there was an international element in the commission of the offence.

The amount of money involved

32.Of the relevance to culpability of the amount of money involved, Yeung JA in the judgment of this court in Chen Zhen Chu said (page 513 D‑E, paragraph 48):

“..。 the gravamen of a money-laundering offence is the amount of money handled, not the amount of profit to the defendants or the loss to the victims.”

We are satisfied that the total sum of money remitted through the four bank accounts, namely over $683 million, is properly categorised as “huge” or, as Mr Grossman described it in his written submission an “enormous sum”.

An international element

33.Of the factor of an international element in the commission of the offence, in the judgment of this court in HKSAR v Leong Wai Keong (unreported, CACC476/2007, 8 December 2008) Yeung JA said (page 5, paragraph 15) :

“… the judge was right to emphasise the international element involved as what the applicant did seriously undermined Hong Kong’s status as a financial and banking centre.”

In that case the applicant had set up three BVI companies for which he had then opened bank accounts in Hong Kong, one bank account in South Korea and three further bank accounts in Taiwan.  Clearly, in this case the initial contact of potential investors in the United Kingdom by marketing staff working in Spain, the remittance by those investors to the bank accounts of BVI companies with banks in Hong Kong and the subsequent return of those monies to Europe evidences a significant international element in the overall scheme.

The ambit of the respondent’s culpability : ‘reasonable grounds to believe’

34.We are satisfied that the judge was entitled to determine that, notwithstanding the respondent’s acceptance that following his conversation with Mr John Ward on 12 July 2006 he himself actually had a reasonable belief that the monies with which he was dealing were the proceeds of a crime, prior to that date (Reasons for Verdict, paragraph 23) :

“… there were strong reasonable grounds to support the belief that the monies represented the proceeds of crime.”

In the first place, the respondent tendered unconditional pleas of guilty to the five charges, in the ‘Particulars of Offence’ of four of which charges the alleged misconduct commenced in 2005.  Secondly, when the judge raised the issue of the ambit of the pleas of guilty tendered by the respondent in relation to the allegations set out in the ‘Particulars of Offence’, in light of mitigation on behalf of the respondent that only at and after 12 July 2006 “reasonable belief was fixed” in the respondent that the monies with which he dealt had their origins in an indictable crime, no objection was taken to the submission made by Mr Marash SC, who then appeared for the prosecution :

“The law there is this, that whether or not the defendant reasonably believed, the question is whether a reasonable man, knowing the facts that the defendant knew, would have believed.  And on the facts of this case, the prosecution case is that that covers the period of the whole charge.  (B)ut if he accepts or if he puts forward that he actually formed a positive belief himself from 12 July, I would not query that.  (B)ut I understood the plea always to be on the basis of that a reasonable man would have been put on notice from an earlier time.”

35.Accordingly, the judge was entitled to have regard to the whole of the amount of proceeds remitted to the various accounts opened by the respondent in Hong Kong in determining the appropriate sentence to impose upon the respondent.

The underlying nature of the transactions and the provenance of the proceeds

36.Whilst it is the case that the prosecution asserted in the Summary of Facts that there was evidence available from only some of the investors that a part only of the remittances to the bank accounts of the three BVI companies were the proceeds of fraud, nevertheless it was clearly asserted that all of the remittances :

“… emanated from share trading in the United Kingdom in breach of United Kingdom laws because none of the company selling those shares in England were registered with the Financial Services Authority to market or sell shares in the United Kingdom.”

Sections 19 and 21 of the Financial Services and Markets Act, 2000 proscribe such conduct and provide a penalty on conviction on indictment of a fine and a sentence of imprisonment not exceeding two years.  There was no evidence nor was it suggested that the monies that were remitted to the bank accounts of the three BVI companies came other than as a result of being proceeds of sale of shares by Pricestone to investors in the United Kingdom.  Accordingly, all of the remittances fell to be regarded as the proceeds of an indictable offence.

37.Equally, the judge was entitled to take into account as a factor of aggravation in the commission of the offence the admission made on behalf of the respondent that following his conversation with Mr John Ward on 12 July 2006, in which he was told that there had been claims of fraud made against Pricestone and that an ‘Investor Alert’ had been issued by both the FSA and the SFC, that he himself actually had a “reasonable belief” that the monies remitted to the various bank accounts were the proceeds of an indictable crime, clearly fraud. Of relevance to that issue, was the fact that the respondent not only continued to receive monies into the two bank accounts that remained in operation, after the closure of the bank account of GTS with DBS Bank on 4 August 2004, but also he opened a bank account in the name of GCS with Hang Seng Bank on 23 September 2006, into which account no less than $39,673,530.27 was remitted. A total of no less than $228,465,578.77 was received in those three accounts in the period after 12 July 2006. Clearly, the bulk of those monies were remitted by the respondent to the accounts in Zagreb and Amsterdam, since it was admitted that just over $600 million of the total of about $683 million received into the various accounts were remitted to those accounts. Of course, it was the respondent who gave instructions for those remittances.

38.The respondent’s conduct post 12 July 2006 gives the lie to the contention made in mitigation that his offence was “a crime of omission”, in particular that he had “left the business too slowly”. On the contrary, he was proactive in opening yet another bank account and actively involved in continuing to effect the return of the monies received in the various bank accounts from Hong Kong to Europe. As Mr Turnbull pointed out in his submissions, it was admitted in mitigation that he continued to operate the accounts and cause those remittances even in face of a warning at the end of 2006 by a friend at Standard Chartered Bank of concerns about the provenance of monies received into the account of GCS with that bank. The respondent’s continued involvement with the enterprise was determined and heedless of the warnings he received.

Benefit to the respondent

39.Of the issue of the extent of the benefit received by the respondent, by the receipt of the transfer into an account in his name with the Hong Kong and Shanghai Banking Corporation of $24,950,421.28 over the period 25 August 2005 and 30 January 2007, Mr Grossman contended that monies were paid out from that account and asserted that in consequence :

“… it is not clear exactly how much he benefited from this arrangement.”

No doubt, monies were paid out of the account, but no information whatsoever as to the fact or the nature of those payments was placed before the trial judge or this court.  In his oral submissions, Mr Grossman conceded that to be the case.  Certainly, no reference was made in the Summary of Facts to the respondent’s bank account with the Hong Kong and Shanghai Banking Corporation being used for the remittance of monies to the accounts in Zagreb and Amsterdam.  Clearly, there would be no reason or logic to transfer the monies from one of the BVI company bank accounts to the respondent’s account before transferring the monies to Zagreb or Amsterdam.  Furthermore, although Mr Midgley advanced both oral and written submissions in mitigation of sentence at some length before the judge, it was not contended that the respondent only received a limited benefit in relation to the funds in his account.

40.In all those circumstances we are satisfied that the judge was entitled to take into account as a factor relevant to sentence that the respondent had benefited personally to the extent of the monies remitted into his own bank account from the bank accounts of the three BVI companies.

41.Given the scale and duration of the respondent’s misconduct, his very considerable personal benefit, the resolute nature with which he continued to receive and return remittances in the face of specific clear warnings as to the underlying nature of the remittances and the obvious jeopardy ensuing to the reputation for integrity of the Hong Kong financial system it is clear that a deterrent sentence was required.

CONCLUSION

42.We are satisfied that the individual and cumulative sentences imposed by the judge on the respondent in this case were clearly wrong or, in the language of Lord Lane CJ in the Attorney General’s Reference (No. 4 of 1989, “unduly lenient” in that they fall :

“… outside the range of sentences which the judge applying his mind to all the relevant factors, could reasonably consider appropriate.”

43.The salient features of the culpability of the respondent and the commission of these offences are, firstly that the ‘money-laundering’ operation had significant international elements, clearly designed to create a series of barriers to prevent an easy understanding of the movement of the monies. Whilst the investors were in the United Kingdom and were lured to their downfall by marketing staff located in Spain the monies thus obtained were sent to Hong Kong. Clearly, there were in place mechanisms designed to make it more difficult to follow the flow of funds, and more particularly to identify the beneficiaries of the scheme. That was achieved firstly by the use of three BVI companies, in which names bank accounts were opened in Hong Kong to receive monies remitted from the United Kingdom, which in the result were returned to Europe by direction of the respondent. Secondly, the respondent, who was in effect the sole signatory of the bank accounts and who directed the movements of monies, not only opened those accounts but also operated them for a period of 21 months during which $683 million was remitted to those bank accounts. Thirdly, in the period post 12 July 2006, notwithstanding his obvious realisation, following the warning given to him by Mr John Ward of DBS Bank, that the monies were the proceeds of crime he continued to operate those bank accounts and received into them no less than $228 million in a period of about eight months, most of which was remitted, as before, to the so‑called “Escrow” bank accounts in Zagreb and Amsterdam. Fourthly, the respondent was clearly the beneficiary of the fruits of the successful operation of the scheme, to the extent of $24.9 million obtained over a period of one year and five months.

The approach to sentencing for each charge

44.Clearly, the division of the respondent's culpability into five separate charges has an element of artificiality. Four of the bank accounts, three in the names of the BVI companies and one in the respondent's own name, were opened in 2005, in and between June and December of that year (Charges 1, 2, 8 and 11). Whilst the DBS account of DBS was closed on 4 August 2006 the respondent continued to operate the other accounts. By contrast, the account of GCS with Hang Seng Bank was opened on 23 September 2006 (Charge 9), only after the respondent’s conversation with Mr John Ward on 12 July 2006 in respect of concerns about the provenance of the monies deposited in the GTS account with DBS. In the result, we are satisfied that the judge was entitled to approach sentence on a ‘ global’ approach.

Starting point

45.In light of the factors, articulated earlier, as aggravating circumstances of the commission of the offences we are satisfied that an appropriate starting point for each of the charges is nine years’ imprisonment.

Discount

46.In taking a starting point of five and a half years’ imprisonment and in imposing sentences of three years and four months’ imprisonment the judge gave a discount from the starting point greater than one‑third. Whilst it was the case that the respondent had pleaded guilty and was of previous good character, the judge gave no explanation for giving a discount from the starting point taken for sentence greater than one‑third. Whilst we acknowledge that, given the present application, the respondent has been unable to proceed for one year with his application to be transferred to serve his sentence of imprisonment in the United Kingdom, we do not regard that as a factor to which regard is to be had in determining the appropriate reduction of sentence from that which is the appropriate starting point for sentence. In the event, there is nothing in the material before this court or that which was before the judge that would justify a discount greater than one‑third from that taken for the starting point for sentence. That discount affords the respondent a “meaningful discount”, as described in the judgment of this court in Li Yan.

Sentence on review

47.In the Secretary for Justice v Wong Hong Leung (unreported, CAAR5/2009, 27 November 2009) in the judgment of this court Stock VP noted of the court’s approach to the imposition of sentence in a successful review of sentence that (page 11, paragraph 28) :

“  Where an accused is serving a term of imprisonment the court on review, where it allows the application for a review generally should impose a sentence which the judge ought to have imposed.  It is however recognized that there are circumstances in which a discount ought properly to be accorded on account of the fact and consequences of the review process itself.  They include the situations where the sentence to be substituted is substantially in excess of that imposed below and/or where the respondent is close to the end of his sentence.”

Clearly, the sentiments articulated in the last sentence echo the observations made in the judgment of Stuart‑Moore VP in the judgment of this court in the Secretary of Justice v Tseung Mang Ka [2000] 4 HKC 611 at 618 A‑B.

48.The respondent’s anticipated ‘discharge date’ from prison, taking into account a likely remission of sentence for good behaviour, is 11 February 2011. It follows that he is not close to the end his sentence. Given the substantial increase in the sentence of imprisonment to be imposed on the respondent, in consequence of the process of review, it is appropriate to discount by six months the sentence that ought to have been imposed upon the respondent in the first place.

49.Accordingly, we grant the application, quash the sentences imposed in the District Court and substitute the following sentences : Charges 1 to 5, a sentence on each of five years six months’ imprisonment, to be served concurrently, resulting in a total sentence of imprisonment of five years and six months.

Mr Richard Grant Turnbull, Ag DDPP of the Department of Justice, for Secretary for Justice

Mr Clive Grossman, SC and Ms Ann Lui, instructed by Messrs Oldgham Li & Nie, for the Respondent